Term
| Article 3 applies to what? |
|
Definition
| applies to Negotiable instruments, if an instrument is not negotiable then the common law of K applies |
|
|
Term
|
Definition
A promise to pay. Two parties involved:
Party promising to pay (the maker)
Party to whom payment is promised (the payee or bearer) |
|
|
Term
|
Definition
An orser to pay. Three parties involved
1. party ordering the payment (drawer)
2. party being ordered to pay (drawee)
3. Party to whom payment is ordered (payee or bearer) |
|
|
Term
|
Definition
| An unconditional promise or order to pay a fixed amount of money that is payable to order or bearer when issued or first in possesion of a holder; is payable on demand at a definite time; and states no unauthorized undertaikin or instruction by the person promising or ordering payment |
|
|
Term
| What is a Holder in Due Course (HDC) |
|
Definition
A holder who takes an instrument for value, in good faith, and with out notice that
(1) the instrument is overdue or dishonored
(2) the instrument has an unauthorized signature or is altered
(3) there is a claim to the instrument
(4) any party has a defense or claim in recoupment on the instrument. |
|
|
Term
|
Definition
| HDC takes the instrument free of personal defenses and claims and subject only to real defenses |
|
|
Term
| What is a Negotiable instrument |
|
Definition
Nine formal elements for notes, first eight for checks:
Writing
Signed by maker
Unconditional
Promise or order
To pay a fixed amount
Of Money
no other unauthorized promise
On demand or at a definite time
To Order or to Bearer |
|
|
Term
|
Definition
| An instrument is negotiated when it is transferred to a subsequent party who becomes a holder |
|
|
Term
| To become a holder of Bearer paper requires |
|
Definition
|
|
Term
| To become a holder of order paper requires |
|
Definition
| A proper indorsement and delivery |
|
|
Term
|
Definition
| If an instrument had been indorse several times, the last indorsement controls what is necessary for further negotiation. |
|
|
Term
|
Definition
| indorsement that names a paricular person as indorsee "pay to Joe Blow" The indorsee must sign in order for the instrument to be further negotiated. |
|
|
Term
|
Definition
| a signature that is not accompanied by the naming of a specific indorsee. Blank indorsement creates bearer paper. May be negotiated by delivery alone. |
|
|
Term
| Qualified indorsements are |
|
Definition
| an indorsement with the words "without recourse" is a qualified indorsement and limits the contract liability imposed on indorsers |
|
|
Term
| Restrictive indorsements are |
|
Definition
| any other language added to an indorsement. Generally are ineffective to limit transfer or negotiation but an instrument with words requiring bank collection, must be paid consistent with the indorsement by any person of the first bank into which the instrument is deposited. |
|
|
Term
Negotiated instruments
4 types of indorsements |
|
Definition
Special indorsement
Blank indorsement
Qualified indorsement
Restrictive indorsements |
|
|
Term
Holder in Due Course
Without notice requirement
Facts constituting notice include (4) |
|
Definition
Instrument overdue (90 in case of check)
Unauthorized signature or alteration
claims to the instrument
defenses or claims in recoupment |
|
|
Term
Holder in Due Course
Without notice requirement
Facts not constituting notice include (9) |
|
Definition
(1)Instrument is antedated, postdated or undated
(2) Instrument issued in return for an executory promise
(3) any party signed for accommodation
(4) an incomplete instrument has been completed
(5) default in the payment of interest
(6) a public filing or recording of a document concerning the instrument
(7) any person negotiating the instrument was a fiduciary
(8) the instrument was sold at a discount
(9) notice of discharge of a party |
|
|
Term
Claims and defenses for Holder in Due Course
They take free from personal defenses and ownership but are subject to the following 8 Real Defenses
|
|
Definition
(a) Forgery
(b) Fraud in the Factum
(c) Alteration of the instrument
(d) Incapacity
(e) Illegality
(f) Duress
(g) Discharge in Insolvency Proceedings
(h) Suretyship Defenses
(i) Statute of Limitations
|
|
|
Term
Commercial papaer
Personal Claims or defenses |
|
Definition
| Anything not a real defense including ownership claims, misrepresentation, simple fraud, breach of K, breach of warranty, payment. |
|
|
Term
| Shelter Rule: Exception to the personal claims or defenses and HDC rule |
|
Definition
| A transferee acquires whatever rights her transferor enjoyed, taking shelter int he status of her transferor. |
|
|
